Electric Car Insurance: What Should You Know?

Why is electric car insurance expensive?

One of the main factors that affect the cost of car insurance is the risk of claims. Electric cars tend to have higher repair costs than petrol or diesel cars, due to their complex technology, expensive batteries, and limited availability of parts and specialists. According to a study by Thatcham Research, the average repair cost for an electric car is 26% higher than for a petrol or diesel car. Moreover, electric cars are more likely to be involved in low-speed collisions, as they are quieter and harder to hear by pedestrians and cyclists. Electric cars are also more attractive to thieves, as they have high resale value and can be hacked remotely.

Another factor that influences the cost of electric car insurance is the value of the vehicle. Electric cars tend to be more expensive than petrol or diesel cars, as they have higher manufacturing costs and lower depreciation rates. According to the Society of Motor Manufacturers and Traders (SMMT), the average price of an electric car in the UK was £44,864 in 2020, compared to £24,975 for a petrol or diesel car. Therefore, electric car owners may have to pay higher premiums to cover the potential loss or damage of their vehicles.

A third factor that affects the cost of electric car insurance is the availability of insurers. Electric car insurance is still a niche market, as not all insurers offer policies for electric vehicles or have the expertise and data to price them accurately. According to a survey by Compare the Market, only 26% of insurers offered electric car insurance in 2020, and only 12% offered discounts for electric car owners6. Therefore, electric car owners may have fewer options and less competition when shopping for electric car insurance, which may result in higher prices.What are the trends and opportunities in the electric car insurance market?

Despite the high cost of electric car insurance, the market is expected to grow significantly in the coming years, as the demand for electric vehicles increases and the government supports the transition to zero-emission transport. According to a report by Fortune Business Insights, the global electric car insurance market size was valued at $40.27 billion in 2021 and is projected to grow to $687.62 billion by 2029, exhibiting a compound annual growth rate (CAGR) of 40.33%7. The UK is one of the leading markets for electric car insurance, as it has the most ambitious regulatory framework for the switch to electric vehicles in the world. The government has set a target to ban the sale of new petrol and diesel cars by 2030, and to ensure that all new cars are zero-emission by 20358. This will create a huge opportunity for insurers to offer electric car insurance to a growing customer base.

The electric car insurance market is also likely to benefit from the technological and social changes that are shaping the future of mobility. For example, the development of autonomous and connected vehicles, which can communicate with each other and the infrastructure, may reduce the risk of accidents and improve the efficiency and safety of driving9. The emergence of new business models, such as car-sharing and subscription services, may also create new demand and challenges for electric car insurance, as customers may require more flexible and personalised coverage. The increasing awareness and concern for the environment and health among consumers may also boost the popularity and acceptance of electric vehicles, as they offer lower emissions and noise pollution.

How to find the best electric car insurance?

Finding the best electric car insurance may not be easy, but there are some steps that electric car owners can take to save money and get the best deal. Here are some tips and help for UK consumers looking for electric car insurance:

• Compare quotes from different insurers and use comparison websites to find the best offers. Some insurers may specialise in electric car insurance or offer discounts for electric car owners, so it is worth shopping around and comparing prices and features.
• Choose the right level of cover and excess for your needs and budget. Electric car insurance may offer different levels of cover, such as third-party only, third-party fire and theft, or comprehensive. Electric car insurance may also include extra features, such as battery cover, charging cable cover, breakdown cover, or courtesy car. You may also be able to adjust the excess, which is the amount you have to pay in the event of a claim, to lower your premium. However, you should always make sure that you have adequate cover and that you can afford the excess in case of an accident.
• Improve your security and driving habits. Electric car owners can reduce the risk of theft and damage by installing security devices, such as alarms, immobilisers, trackers, or steering locks, on their vehicles. They can also park their vehicles in a safe and well-lit place, preferably in a garage or a driveway. Electric car owners can also lower their premiums by driving safely and avoiding accidents, speeding, or other offences that may result in points on their licence or claims on their policy.
• Take advantage of discounts and incentives. Electric car owners may be eligible for various discounts and incentives that can lower their insurance costs. For example, they may qualify for a low-mileage discount, if they drive less than a certain number of miles per year, or a multi-car discount, if they insure more than one vehicle with the same insurer. They may also benefit from a government grant, which can cover up to 75% of the cost of installing a home charging point for their electric vehicle.

If you want more information from the SMMT click here